oil inventory report

Oil prices are mixed in early morning trading after strong across the board gains on Tuesday. Last night’s API oil inventory report showed builds in crude oil and gasoline with distillate fuel declining on the back of a cold weather reporting week.

Crude oil futures are struggling to stay in positive territory after mixed API and EIA inventory reports. With crude oil builds likely to come across the month of January, the market is once again discounting most of the API draw in crude oil.

With total U.S. crude oil and refined product inventories already lower by more than 33 million barrels since the middle of October, if crude oil enters into a strong destocking pattern as evidenced by the API report, the current oil price rally is likely to extend further.

The Jan Brent/WTI spread has been mostly in a narrowing mode this week as the market seems to be more focused on what could be an improvement in some of the lingering international supply issues rather than focused on the growing surplus of oil in the U.S.

After surprisingly large draws in refined products in the API oil inventory report the market has turned the corner and has been trading higher since late yesterday afternoon. The market is in short covering rally ahead of today’s EIA oil inventory report.

The tale of two crudes this week with the spot WTI contract once again under strong selling pressure while the spot Brent contract is modestly higher. The Brent/WTI spread widened by more than 10% overnight.

The combo of a bearish U.S. crude oil inventory report on Monday followed by expectations for another large build in crude oil stocks in Wednesday’s EIA oil inventory report sent futures prices tumbling on expiration day for the November WTI contract.

The oil complex is becoming more and more convinced that the Iranian negotiations will make progress and as such oil prices declined across the board on Tuesday. Further, skepticism that the U.S. politicians in Washington will not be able to come up with a deal weighted on oil.